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The European Union last week approved plans for up to another €10bn of funding for Anglo Irish Bank.

Professor Honohan said yesterday that plans to recapitalise the bank were well on track and had little impact on the Government's overall deficit plans.

He said Ireland remained committed to its target of reducing its budget deficit to 3% of gross domestic product by 2014.

'It's a very high deficit measured this year because we're taking the hit, we're acknowledging the losses in the banking system and those losses which are being paid for by the Government have to be included in the deficit,' he said.